arXiv subjects

Raghav Malhotra

Publications and source records attributed to Raghav Malhotra.

4 recordsLinked to original sources

arXiv2026

A Frequentist Approach to Revealed Preference Analysis

This paper develops a framework to study the statistical power of revealed-preference tests. With randomly sampled budgets and mild smoothness of demand, statistical learning implies that any model consistent with the data must approximate true choice behaviour. We interpret this result as follows: passing a revealed-preference test is informative only to the extent that the data are sufficiently rich to rule out economically meaningful departures from the maintained model. We make this precise by linking sample size and confidence to the magnitude of detectable departures, and by characterising how power rises with additional observations. Extending our approach beyond revealed-preference inequalities to smooth functional restrictions yields practical tests, even when exact revealed-preference tests are computationally infeasible. We also provide confidence intervals for smooth functionals of demand, including welfare effects. Simulations show that standard sample sizes can generate widely different power across models, contextualizing why some conditions ``rarely reject'' in practice.

econ.TH↗

arXiv2025

Consumer Welfare Under Individual Heterogeneity

We propose a nonparametric method for estimating the distribution of consumer welfare from cross-sectional data with no restrictions on individual preferences. First demonstrating that moments of demand identify the curvature of the expenditure function, we use these moments to approximate money-metric welfare measures. Our approach captures both nonhomotheticity and heterogeneity in preferences in the behavioral responses to price changes. We apply our method to US household scanner data to evaluate the impacts of the price shock between December 2020 and 2021 on the cost-of-living index. We document substantial heterogeneity in welfare losses within and across demographic groups. For most groups, a naive measure of consumer welfare would significantly underestimate the welfare loss. By decomposing the behavioral responses into the components arising from nonhomotheticity and heterogeneity in preferences, we find that both factors are essential for accurate welfare measurement, with heterogeneity contributing more substantially.

econ.TH↗

arXiv2024

Beyond the Mean: Testing Consumer Rationality through Higher Moments of Demand

We study a setting where an analyst has access to purely aggregate information about the consumption choices of a heterogenous population of individuals. We show that observing the statistical moments of market demand allows the analyst to test aggregate data for rationality. Interestingly, just the mean and variance of demand carry observable restrictions. This is in stark contrast to impossibility result of the Sonnenschein-Mantel-Debreu theorem, which shows that aggregate demand carries no observable restrictions at all. We leverage our approach to deliver a characterization of rationality in terms of moments for the common two-good case. We illustrate the usefulness of moment-based restrictions through two applications: (i) improving the precision of demand and welfare estimates; and (ii) testing for the existence of a welfare-relevant representative consumer.

econ.TH↗

arXiv2021

Exact inference from finite market data

We develop conditions under which individual choices and Walrasian equilibrium prices and allocations can be exactly inferred from finite market data. First, we consider market data that consist of individual demands as prices and incomes change. Second, we show that finitely many observations of individual endowments and associated Walrasian equilibrium prices, and only prices, suffice to identify individual demands and, as a consequence, equilibrium comparative statics.

econ.TH↗